IP to have AFA before undertaking assignment post 31 December, 2019: IP Regulations
The IP had provided his consent to accept the assignment in Form-2 on 5 April, 2019 prior to the amendment made to IP regulation for acceptance of assignment in the matter CIRP of MLP Developers & Promoters Private Limited before 31 December, 2020
The Insolvency and Bankruptcy Board of India (IBBI) has disposed of the Show Cause Notice(SCN) without any direction against Mr. Romesh Chander Sawhney, who is a Professional Member of the Indian Institute of Insolvency Professionals of ICAI (IPA) and an IP registered with the Insolvency and Bankruptcy Board of India (IBBI).
In this matter, the IBBI had issued the SCN to the IP for accepting the assignment as the Interim Resolution Professional (IRP) in the Corporate Insolvency Resolution Process (CIRP) of MLP Developers & Promoters Private Limited after 31 December 2019 without holding a valid Authorisation for Assignment (AFA) issued to him by his IPA.
The IP stated that he had submitted his expression of interest in the MLP Developers & Promoters Private Limited on 5 April 2019 when the matter was filed before the Hon'ble NCLT, Chandigarh Bench in the month of April 2019 prior to the amendment of regulation 7A to the IP Regulations.
He submitted that he is a senior citizen aged about 63 years and could not attend office due to sudden health problems in the month of December 2019. As he did not have any assignment in hand on 1st January 2020 and his office staff could not interpret regulation 7A of the IP Regulations and thought it was not applicable to them.
He further put forth that he had applied for AFA on 9th June 2020 by filing an online application on Form No. AA with the IPA to rectify the procedural lapse. Since the insolvency regime in India is new and emerging, he is striving to learn and cope up with the fast changes. He also assured that he will be extremely careful, diligent, strictly act as per law and not repeat this action in future.
The Disciplinary Committed(DC) noted that the provisions of the Code and regulations are spelt out in a plain and unambiguous language. Regulation 7A of IP regulations requires for any IP to have AFA before undertaking any assignment after 31st December 2019.
It is clear from the said Regulation that one of the essential conditions for undertaking any assignment by an IP is that he should have a valid AFA which is issued by the IPA with which he is enrolled. In other words, without AFA, an IP is not eligible to undertake assignments or conduct various processes thereof.
Regulation 7A was inserted in the IP Regulations vide notification dated 23 July 2019, much before 31 December, 2019. Adequate time was given to the professionals to obtain AFA from the respective IPAs.
The DC further noted that the certificate of registration granted to an IP is subject to the condition that he should follow at all times the provisions of the Code and Regulations and the by-laws of Insolvency Professional Agency of which the IP is a member and also follow the Code of Conduct specified in the First Schedule to the IP Regulations. In this regard, clauses(a) and (h) of regulation 7 (2) of the IP Regulations was also referred to.
The credibility of the processes under the Code depends upon the observance of the Code of conduct by the IRP/RP/Liquidator during the process. Section 208(2) of the Code provides that every IP shall take reasonable care and diligence while performing his duties and to perform his functions in such manner and subject to such conditions as may be specified.
In the present matter it was observed that Mr. Sawhney had provided his consent to accept the assignment in Form-2 on 5 April, 2019 prior to the amendment made to IP regulation for acceptance of assignment in the matter CIRP of MLP Developers & Promoters Private Limited before 31 December, 2020. However, it was observed that the date of commencement of the CIRP is 27 January, 2020.
The DC found that an order had been passed against the IP by the Disciplinary Committee of IPA for accepting assignment as IRP after 31 December, 2019 without holding a valid AFA in the matter of MLP Developers & Promoters Private Limited and decided that the IP was not guilty of Professional Misconduct.